Recording Bond Transactions with Microsoft Money

A bond is really a loan that you make to a government agency or private corporation. During the life of the loan, the government agency or corporation pays you interest, known as the coupon rate. Interest payments are usually made twice yearly. Bonds are considered safer investments than stocks because the amount of the bond is paid back at the end of the loan term, known as the maturity date. Instead of owning part of the company, which is the case with stocks, bondholders own a debt that the company or government agency that issued the bond is obliged to pay back.

Read on to find out how to track bond purchases and interest distributions with Money.

Recording the purchase of a bond

When you purchase a bond, follow these steps to record its purchase:

1. Click the Investing tab.

2. Click the Portfolio Manager link.

The Portfolio Manager window appears.

3. Click the Work with Investments link, and then choose Record a Buy on the drop-down menu.

The Edit Transaction dialog box appears.

4. On the Inv. Account drop-down menu, select the name of the investment or retirement account where you want to record the purchase of the bond.

5. In the Date text box, enter the date you purchased the bond.

Be sure to enter the date correctly. Money needs this date to calculate the bond’s value over time.

6. On the Investment drop-down menu, enter a name for the bond and click the Tab button.

After you enter the name, you see the Create New Investment dialog box.

7. Select Bond in the What Type of Investment Is It list, and click the Next button.

You see the first of several New Bond dialog boxes.

8. Select the type of bond, and click the Next button.

If you can’t find the kind of bond you are dealing with in the list, select the Other Bond Type option.

9. Make sure that the name you entered is correct in the Name text box, choose a country in the Country/Region drop-down list, and click the Next button.

Now you’re getting somewhere. You see the Enter a Few More Bond Details dialog box.

10. Describe the bond, and click the Next button.

To describe the bond, enter information in these text boxes:

• Rating: Moody and Standard & Poor’s rate bonds according to their reliability. If you know the rating, choose it from the drop-down menu. You can generate Money reports on the basis of bond ratings.

• Coupon Rate: Enter the annual interest rate that the bond pays.

• Interest Paid: From the drop-down menu, choose the frequency with which interest income from the bond is paid.

• Maturity Date: Enter the date at which the bond falls due and is to be paid back to you.

• Call Date: Enter the earliest date that the bond can be redeemed. If the bond is redeemable at more than one date, enter the earliest date. You are only guaranteed interest payments up to the call date.

• Status: Select the Tax-Exempt check box if interest income from the bond is exempt from federal taxes. This is the case with most municipal bonds.

11. Click the Finish button.

You return to the Edit Transaction dialog box.

12. On the Transfer From drop-down menu, choose the account in which you track the value of the bond.

Money to pay for the bond is transferred from the cash reserves in your investment or retirement account.

13. In the Quantity text box, enter the face value of the bond.

The face value, also called the par value, is the value of the bond when it matures. Most bonds have a $1,000 face value. The face value is used to calculate interest payments. For example, a 5 percent bond with a face value of $1,000 pays $50 interest annually.

14. In the Price text box, enter the price of the bond.

The price of a bond is stated as a percentage of the bond’s face value.

15. In the Accrued Int. text box, enter how much interest income, if any, has accumulated between the last interest payment date and the date of the sale.

Enter 0 if you have not sold this bond yet.

16. If you paid your broker a commission for purchasing this bond, enter it in the Commission text box.

17. Click OK.

Your bond is listed in the Portfolio Manager window.

Recording interest payments from bonds

Periodically, creditors pay interest on bonds you own, and when they pay up, follow these steps to record interest income from a bond: